Investment portfolios could take a hammering if a “double bubble” of soaring gold prices and American tech stocks bursts, economists say.

The Bank for International Settlements (BIS), which connects the world’s central banks, has warned that gold and share prices have entered “explosive territory” simultaneously for the first time in at least 50 years. It cautioned that, after explosive phases, bubbles “typically burst with a sharp and swift correction”.

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The price of gold has risen 61 per cent this year to more than £3,200 per troy ounce, down from a record £3,250 in October. At the same time, excitement about artificial intelligence has pushed the S&P 500 index of leading US stocks up 16 per cent this year. This has been driven by the performance of the so-called Magnificent Seven tech firms: Google’s owner Alphabet, Amazon, Apple, Meta (which owns Facebook), Microsoft, Nvidia and Tesla. Together they make up almost 35 per cent of the S&P 500.

Laith Khalaf from the investment firm AJ Bell said: “If you’re worried about AI exposure specifically, you might want to scale back your US technology holdings and allocate that money to other sectors and regions.”

The swift rise of tech stock values has been likened to the run-up to the dotcom crash in the early 2000s.

Stocks are judged on their earnings per share — a p/e ratio that gives an idea of how expensive a stock or index is. A high p/e ratio suggests that a stock may be overvalued. The S&P 500’s overall p/e ratio is 27.5. On the verge of the dotcom bubble bursting in December 2001 it peaked at 30.9.

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Nick Britton from the Association of Investment Companies (AIC) said: “The high concentration of the US and global stock markets in a small number of names is certainly giving investment trust managers pause for thought.”

Investment trusts are publicly listed companies that invest in shares and other asset classes. “A third of our managers are worried about a potential stock market bubble, even though half still expect global markets to continue to rise next year,” Britton said.

Niamh Brodie-Machura from the investment firm Fidelity said that investors should consider Japanese or European stocks. She said firms in Europe were looking like good value.

“The case for Europe has strengthened considerably, with falling inflation, lower interest rates and fiscal support providing a supportive backdrop. Europe is home to many businesses that are global leaders with resilient balance sheets and proven growth profiles, with notably attractive valuations.”

The Stoxx 600, an index of Europe’s largest companies, has a p/e ratio of about 18, much lower than the US’s. Japan’s Nikkei 225 index has a p/e ratio of about 17. The Stoxx 600 is up 13.8 per cent this year and the Nikkei 25.6 per cent, hitting an all-time high in October.

Brodie-Machura said: “Japan is emerging from the staid years of low inflation and low interest rates, wages are improving and consumer spending power is growing.”

Fidelity said stocks in emerging markets, including China, Taiwan, India and Brazil, had returned an average of 25 per cent this year, making them a top performer.

Gold is traditionally seen as a safe haven asset in times of trouble, and their value has soared this year. Investment trusts invested in commodities and natural resources including gold and silver reported the best returns of any trust sector this year, according to the AIC, with an average of 44 per cent. The average return across all investment trusts was 10.3 per cent.

The BIS said the strong performance of gold and other precious metals sat “oddly” with their traditional role as safe haven assets. Usually they would be unattractive in an environment where share prices are rising, so offering better returns than could be had from gold.

The BIS said that speculation by “trend-chasing retail investors” could be one reason for the surge. Britain’s coinmaker the Royal Mint, which also sells gold and silver bullion, said that coin sales from June to September were up 102 per cent on the same period a year ago.

The investment bank Goldman Sachs expects the price of gold to rise from $4,288 per troy ounce today to $4,900 by the end of next year.

Khalaf said investors worried about their exposure to equities and gold may wish to consider bonds — government or company debt. He said: “The yields you can get on bonds are much more attractive than they were five years ago, which means you are at least being compensated for these risks with a reasonable return.”

He said that multi-asset funds, which invest in a range of equities, bonds and other assets such as property or commodities, were a good option for “hands-off” investors. Different asset allocations are available depending on how much risk you want to take.

A final option for worried investors could be money market funds, which are lower-risk investments with holdings in cash or short-term bonds issued by governments or large companies.

Short-term money market funds were the most popular investment sector among Isa investors in October, according to the Investment Association, with a net £120.9 million invested.